An honest blog about starting a business, building wealth and retiring early

Why hiring your first employee as soon as financially feasible is critical to getting rich

As an avowed introvert, hiring my first employee didn’t come easily or naturally for me. I probably delayed it for too long, but in hindsight, hiring my first employee (and then additional ones) played a paramount role in my ability to accumulate wealth.

When is it the right time to hire an employee?

I recommend hiring your first employee once the following events have occurred:

Your business is financially viable — meaning, it is generating enough income to cover your most basic business and household expenses.

Your business is generating excess cashflow, enough to cover the going market rate for an entry-level employee.

Through hands-on experience, you have developed and learned all of the basic fundamentals of operating and growing your business. (This doesn’t mean you’re an expert at every task.)

You have developed basic operating procedures and systems that a new employee will be able to understand and execute.

Once the above events have been triggered, you are stunting the growth potential and profitability of your business if you do not hire an employee.

Why hiring an employee unleashes the full potential of your business

Successful businesses succeed through efficiency and leverage. In order to achieve both, you must automate and delegate. These two concepts are inextricably intertwined. Automation enables delegation and delegation requires automation.

For example, if you automate your shipping process through step-by-step procedures, it is then possible to delegate that process to another person. So long as that person is able to follow instructions and to competently carry them out, you have just freed yourself to tackle other “higher level” business tasks and to move your company forward.

The flip side is also true. In order to delegate your shipping process, you must first automate it. Otherwise, delegation would become a frustrating and inefficient exercise.

It is easy to understand why efficiency makes you money. However, leverage is not always an intuitive concept. “Why should I pay someone $15 an hour to ship my packages out when I could do that myself and save the money?”

There are three main reasons why taking the DIY approach to business sets you up to fail. First and foremost, this approach immediately places both a real and psychological ceiling on your growth potential; you will not be motivated to or even capable of growing beyond what you alone can accomplish. Since business growth is the engine that drives wealth accumulation, slowing or stunting that process will have undesirable consequences.

Second, by refusing to or failing to delegate, you are squandering your most valuable asset as an entrepreneur: time. In my shipping example, you may save $15 per hour by doing it yourself, but you must also remember that you’ve then decided to forego other “higher level” business activities that will likely gain you much more than $15 per hour in the long run.

Third, factors of production such as machines, computers, and employees are really the reasons that businesses make money in the first place. A successful business generates more money from those factors of production that they cost. Therefore, it behooves a growing company to utilize those factors of production in order to meet demand and to increase profits.

Hiring employees forces you to automate, delegate, and grow

Having employee(s) on your payroll forces you to automate your process and to scale your company. This is because managing employee(s) and growing your company require many of the same processes (i.e., automation, delegation, and scaling).

Once you hire good, competent employees who are able to consistently execute tasks, the process feeds on itself, creating a positive feedback loop that will expand and improve your company.

Hire just enough employees to be slightly “stretched”

Having extolled the merits or hiring employees, I should note here that there is such a thing as having too many employees. In my experience, the sweet spot is to have enough employees so that you can accomplish all of your tasks and meet demand, but feel slightly “stretched,” particularly during busy periods.

The reason for this is that having too many employees can create a negative feedback loop of complacency, boredom, and laziness. I have found that the maximum point of fulfillment and motivation is when you (and your employees) are good and busy without feeling overwhelmed.

Having employees humanizes your business into a shared experience and encourages you to stop and smell the roses

Aside from the societal benefits of creating jobs, having other human beings share in the experience of running your businesses humanizes it and makes you feel more fulfilled. Even an introvert like me can appreciate these psychic benefits.

In addition, good employees create breathing room for you to stop and enjoy the fruits of your labor, ground you, and give you proper perspective.

About Me

At age 45, I recently hit my "number." I'm now officially somewhat rich. I'm 100% debt-free with a net worth of over $7 million. While I still choose to work part-time to help run the business I started 15 years ago, I have plenty of free time to enjoy with my family, and I travel for fun frequently. But it wasn't always this way. Read more